Russian Currency Control: Guide to Foreign Trade Contract Registration

 

March 26, 2024

BRACE Law Firm ©

 

Organizations specializing in foreign trade (the "Foreign Trade") transactions must comply with current legislative requirements governing the execution of currency operations. The obligations of a foreign trade participant include the timely submission of documents, up-to-date information on foreign counterparties, and data regarding the timing and volume of planned transactions, as well as contract registration for currency control purposes.

Consequently, foreign trade participants should clarify in advance the applicable thresholds and deadlines for registering a currency contract with a bank and how the registration of export or import agreements is monitored in practice.

Registration of a Foreign Trade Contract as an Element of Currency Control

Contract registration in foreign trade is carried out within the currency control framework based on Federal Law No. 173-FZ, On Currency Regulation and Currency Control (the "Federal Law No. 173-FZ").

Under Article 22 of Federal Law No. 173-FZ, the Bank of Russia and federal executive bodies authorized by the Russian Government serve as currency regulation authorities. These bodies develop regulations binding on residents and non-residents and oversee the activities of tax agents.

The currency control authorities are the Federal Customs Service (FCS) and the Federal Tax Service (FTS). The FCS handles currency control related to the movement of goods and currency across the border. Within its competence, the FTS monitors all currency operations (except those involving the movement of goods across the Russian border) and the procedure for residents opening and using accounts in foreign banks.

Banks, in turn, act as currency control agents and monitor compliance with currency legislation. They verify transactions between residents and non-residents and submit reports to currency control authorities, thereby informing the Federal Tax Service of these transactions. [1] As currency control agents, banks must ensure the maintenance and storage of currency control documents, known as the currency control file, in accordance with internal regulations. The currency control file includes the following documents (or copies) and information:

• Documents related to the execution of operations;
• Contracts and bank control statements;
• Applications to amend a registered contract or to de-register a contract (loan agreement);
• Supporting documents and statements of supporting documents;
• Other documents and information.

Banks store such documents in electronic form and, if necessary, reproduce them on paper while maintaining the integrity of all data as submitted to the bank.

Under Federal Law No. 173-FZ, residents conducting currency operations in the Russian Federation must:

• Submit documents and information to currency control authorities and agents in cases provided for by Federal Law No. 173-FZ (Clause 1, Part 2, Article 24);
• Maintain records and prepare reports on their currency operations in the established manner, ensuring the preservation of relevant documents and materials for at least three years from the date of the operation, but no earlier than the contract performance deadline (Clause 2, Part 2, Article 24);
• Comply with orders from currency control authorities to eliminate identified violations of Russian currency legislation and acts of currency regulation authorities (Clause 3, Part 2, Article 24).

Contract Registration Instead of a Transaction Passport

Based on Federal Law No. 173-FZ, the Central Bank of the Russian Federation developed Instruction No. 181-I dated August 16, 2017, On the Procedure for the Submission by Residents and Non-Residents to Authorized Banks of Supporting Documents and Information During Currency Operations, on Unified Forms of Accounting and Reporting for Currency Operations, and the Procedure and Deadlines for Their Submission (the "Instruction No. 181-I"), which took effect on March 1, 2018.

Notably, Instruction No. 181-I introduced a significant simplification: the requirement for residents to obtain a transaction passport from an authorized bank was abolished. In its place, a procedure for registering contracts with banks and assigning them unique numbers was introduced.

Threshold Amounts for Contract Registration

Instruction No. 181-I establishes that for registration with an authorized bank, the value of obligations under the contract must equal or exceed the equivalent of:

• 3 million rubles for import contracts involving the movement of goods from foreign territories across the customs border into Russia without an obligation for re-export;
• 10 million rubles for export contracts involving the movement of goods from Russia across the customs border to foreign territories without an obligation for re-import. [2]

If the contract does not specify the amount of obligations, it must be registered upon reaching the corresponding payment thresholds mentioned above. For example, if you purchase or supply goods based on appendices or specifications, the contract does not need to be registered until the total value of these documents reaches the threshold.

The amount of obligations is determined at the official exchange rate of the Bank of Russia on the date the contract is concluded or, in the case of an amendment to the contract value, on the date the latest amendment (supplement) providing for such a change is signed (Article 4.2).

If an import or export contract does not exceed 600,000 rubles, it is not required to be registered or submitted to the bank in original form; notifying the bank of the operation type code is sufficient. Banks also typically request a letter confirming that the contract amount does not exceed 600,000 rubles.[3]

Residents must also consider Decrees of the President of Russia issued as part of special economic measures in response to unfriendly actions by foreign states,[4] as these apply to transactions even below 600,000 rubles. If a transaction falls under these Decrees, residents must comply with the procedures established therein. [5] Specifically, residents must obtain authorizations for transactions in certain cases, including:

• Transactions between residents and persons from unfriendly foreign states regarding the provision of ruble-denominated credits and loans (if not prohibited), as well as transactions involving the transfer of ownership of securities and real estate;
• Transactions between residents and foreign persons not from unfriendly states if the subject matter involves securities or real estate acquired after February 22, 2022, from persons of unfriendly states;
• Currency operations involving the provision of foreign currency by residents to non-residents under loan agreements;
• Residents crediting foreign currency to their accounts (deposits) in banks or financial institutions outside Russia if related to dividends (profit distributions) from Russian joint-stock companies, limited liability companies, business partnerships, or production cooperatives;
• Money transfers without opening a bank account using electronic means of payment provided by foreign payment service providers, if related to dividends (profit distributions) from Russian corporate entities;
• Transactions by certain persons resulting in the establishment, change, or termination of rights to own or use more than 1% of the shares or stakes in the charter capital of a Russian credit organization, insurance company, non-state pension fund, microfinance company, or management company of an investment fund, or more than 1% of the votes;
• Stakes in the charter capital of limited liability companies (excluding credit and non-credit financial organizations), as well as transactions allowing one to determine the management conditions or business activities of such companies.

Types of Contracts Subject to Registration

Registration requirements apply to foreign trade contracts where settlements are conducted through a resident's foreign currency or Russian ruble accounts opened in authorized banks or banks outside Russia. These include loan agreements (except those recognized as or equated to loan agreements under Russian law) and export and import contracts providing for (Clause 4.1 of Instruction No. 181-I):

• The import or export of goods, including under agency, commission, or mandate agreements;
• The sale (purchase) of goods and/or the provision of services related to the sale (purchase) of goods necessary for the operation and maintenance of vehicles in transit or at intermediate stops (e.g., fuel and lubricants), excluding spare parts and equipment;
• Leasing with a buyout option or leasing with a condition to acquire ownership;
• The provision of services or performance of work (excluding those listed above), the transfer of information, or the transfer of intellectual activity results and exclusive rights to them, including under agency, commission, or mandate agreements.

When Registration Is Not Required

A unique number is not assigned for import contracts between 600,000 rubles and 3,000,000 rubles, or for export contracts between 600,000 rubles and 10,000,000 rubles. In these cases, the resident must submit any document allowing the bank to assign an operation code, such as the contract itself, an appendix, invoice, act, or other transaction document.

The exemption from submitting currency operation documents depends specifically on the contract value, not the payment amount. If a contract valued at 700,000 rubles requires a 300,000 ruble advance payment, submitting documents is mandatory. Conversely, if a 400,000 ruble payment covers two separate contracts each valued at no more than 200,000 rubles, no documents are required.

The following agreements are not subject to registration, regardless of the amount:

• Financial lease (leasing) agreements that do not provide for the acquisition of ownership of the leased item;
• Lease agreements without a buyout clause, including real estate leases;
• Agreements providing for the export (import) of securities in physical form;
• Agreements providing for the transit of goods across Russia or where no border crossing occurs.

Documents and Information Required for Registration

A resident who is a party to an export or import contract must register it with an authorized bank in accordance with Instruction No. 181-I and conduct settlements only through accounts at the authorized bank that registered the contract or accepted it for service (the "Registration Bank"), and/or through accounts at a non-resident bank.

To register an export contract, the resident must submit export contract details to the Registration Bank, including the contract type, date, number (if any), currency, obligation amount, completion date, and the non-resident counterparty's details (name and country).

Alternatively, the resident may submit the export contract or an extract containing the information necessary for registration and currency control.

If only the details are submitted initially, the resident exporter must provide the actual export contract to the Registration Bank no later than 15 business days after the registration date (Articles 5.3 and 5.4 of Instruction No. 181-I).

To ensure successful registration, the contract should include:

• The subject matter (goods, works, services, with a specific list or reference to an appendix);
• The currency and price (the total amount or just the currency if the amount is not yet determined);
• Deadlines for fulfilling obligations (receiving export proceeds, receiving goods, or returning advance payments);
• Payment terms (deadline and form of payment);
• Contract term (the period for completing supplies and settlements);
• Addresses and bank details of the parties;
• Other terms necessary for that specific type of agreement.

Registration Banks may refuse registration if these conditions are missing; thus, their inclusion is highly recommended.

For an import contract, the resident must submit the import contract or an extract to the Registration Bank (Article 5.6 of Instruction No. 181-I). This is necessary for currency control, including monitoring compliance with currency repatriation requirements under Part 1.1 of Article 19 of Federal Law No. 173-FZ.

Export and import contracts with non-residents must specify the deadlines for fulfilling obligations. Simply stating the contract's overall term is insufficient, as that term might include warranty periods or claim windows that are irrelevant to currency repatriation monitoring. Banks will refuse currency operations if the submitted documents do not meet currency legislation requirements.

In some cases, parties use a framework agreement containing general rules without specific details on the subject, price, or deadlines, coordinating specific terms via email. Under Part 2 of Article 434 of the Civil Code, a written contract may be concluded by signing a single document or by exchanging letters, telegrams, telexes, faxes, or other electronic documents that reliably identify the sender.

The Federal Tax Service and the Central Bank have concluded that such a framework agreement, combined with a properly certified printout of the email correspondence containing essential terms, satisfies the requirements of Part 1.1 of Article 19 of Federal Law No. 173-FZ. [6]

Thus, to register a contract, a resident may submit a contract in the form of a single document or a collection of documents meeting the formal requirements for a contract, provided they contain all essential terms. If the submitted information is insufficient, the bank will request additional documents.

Deadlines for Registering a Foreign Trade Contract

Instruction No. 181-I establishes the following deadlines for contract registration:

• When debiting funds (in foreign or Russian currency) to a non-resident: no later than the date the payment order is submitted (Subclause 5.7.1);
• When crediting funds from a non-resident: no later than 15 business days after the credit date (Subclause 5.7.2);
• When debiting or crediting funds via a resident's account at a non-resident bank: no later than 30 business days after the end of the month in which the operation occurred (Subclause 5.7.3);
• If the contract amount was initially undefined: no later than the payment date that brings the total to 3 million rubles (import) or 10 million rubles (export), or no later than the filing date of the customs declaration that causes the total goods value to reach these thresholds (Subclause 5.7.4);
• When fulfilling obligations by importing/exporting goods requiring a customs declaration: no later than the date the declaration is filed (Subclause 5.7.5);
• When fulfilling obligations by importing/exporting goods not requiring a declaration: no later than 15 business days after the end of the month in which the supporting documents were executed (Subclause 5.7.6);
• When fulfilling obligations through work, services, or IP transfers: no later than 15 business days after the end of the month in which the supporting documents were executed (Subclause 5.7.7).

The Registration Bank must register the contract no later than the next business day after the resident submits the required documents and assign a unique number. A bank control statement is generated simultaneously. Within one business day of registration, the bank informs the resident of the unique number and registration date (Clauses 5.5 and 5.8 of Instruction No. 181-I). Contracts containing both export and import terms follow the registration rules for import contracts, using a single unique number and bank control statement (Clause 10.1 of Instruction No. 181-I).

Statement of Supporting Documents (SPD)

For a registered contract, the resident must submit a Statement of Supporting Documents (SPD) along with the documents themselves upon the occurrence of:

• Fulfillment of obligations (e.g., import/export of goods, performance of work);
• Termination of obligations (e.g., offset of claims, novation, or liquidation of the debtor/creditor);
• Change of parties (e.g., assignment of claims or transfer of debt);
• Change in the amount of obligations by means other than settlements.

Supporting documents may include:

• Transport, commercial, and other documents for goods where customs declarations are not filed (Clauses 8.1.1 and 8.1.2 of Instruction No. 181-I);
• Acceptance certificates, invoices, and other commercial documents for work, services, or IP transfers (Clause 8.1.3 of Instruction No. 181-I).

The SPD uses a unified form found in Appendix 6 to Instruction No. 181-I. It must be submitted to the Registration Bank no later than 15 business days after the end of the month in which the supporting documents were executed or the customs release date was marked. Customs declarations themselves do not need to be submitted, as banks receive this information electronically from the customs authorities (Clause 8.8 of Instruction No. 181-I). If information is contained in multiple documents, the deadline counts from the date of the latest document.

If the deadline falls between de-registering a contract at one bank and registering it at another (or after a bank's license is revoked), the SPD must be submitted within 15 business days of the new bank accepting the contract for service (Clauses 11.3 and 12.3 of Instruction No. 181-I). A bank may fill out the SPD independently if authorized by the contract (Clause 8.4 of Instruction No. 181-I).

If the information in an SPD changes, a new SPD must be submitted within 15 business days after the changes are documented (Clause 8.7 of Instruction No. 181-I). SPDs are considered submitted on time if the resident meets the Instruction No. 181-I deadlines and the bank accepts them after verification (Clause 16.7 of Instruction No. 181-I).

The Registration Bank verifies the SPD within 10 business days for customs declarations (involving advance payments for imports or deferred payments for exports) and within 3 business days for all other cases (Clause 16.2.2 of Instruction No. 181-I). If the bank finds errors or missing documents, it will return the SPD with the reasons for refusal. The resident may then correct and resubmit it. If the check is successful, the bank notifies the resident of the acceptance date (Clauses 16.3 and 16.5 of Instruction No. 181-I).

De-registration and Transfer of Contracts

A contract may be de-registered for the following reasons (Clause 6.1 of Instruction No. 181-I):

• The contract is transferred to another authorized bank or the resident closes all accounts at the Registration Bank;
• All obligations are fulfilled by both parties;
• A resident assigns claims or transfers debt to another resident;
• A resident assigns claims or transfers debt to a non-resident;
• The contract was registered in error or amended such that registration is no longer required.

The resident must submit a written request providing the unique contract number and the legal grounds under Instruction No. 181-I. Supporting documents (e.g., assignment agreements) must be attached. The bank has two business days to process the request. If denied, the bank must provide an explanation and indicate necessary corrections.

If obligations continue after de-registration due to contract amendments, the resident must submit an application to amend the bank control statement, and the bank will resume accounting for the contract. When rights or debts are transferred between residents, the first resident must de-register the contract and transfer it (or an extract) to the second resident. The new Registration Bank then requests the bank control statement from the Bank of Russia and assigns a new unique number (Clause 10.2 of Instruction No. 181-I).

If a bank's license is revoked, the resident must, within 30 business days, provide the new Registration Bank with the unique number, registration date, and the contract or extract (Clause 11.1 of Instruction No. 181-I). If funds are processed through a different bank during the transition, the resident must register the contract with that bank (Clause 11.2 of Instruction No. 181-I). The new Registration Bank will request the statement from the Bank of Russia, make changes, and keep the original unique number (Clauses 11.4 and 11.5 of Instruction No. 181-I).

Transferring a Contract to Another Bank

When transferring a contract to another bank or closing accounts, the resident must move the contract to the new Registration Bank within 30 business days after de-registration (Clause 12.1 of Instruction No. 181-I). The resident provides the unique number, original registration date, and the contract or extract. The new bank retains the unique number and continues the bank control statement (Clauses 12.5 and 12.6 of Instruction No. 181-I).

If the Registration Bank is under anti-Russian sanctions, operations may be conducted through accounts at a different bank without transferring the contract registration. In such cases:

• When transferring funds received from a non-resident from a different bank to the Registration Bank, provide a bank statement or credit document and identify the funds with an operation code;
• If funds are kept at the other bank, provide the Registration Bank with a statement or credit document and an SPD reflecting the operation currency and amount;
• When debiting funds from the other bank to a non-resident, provide the Registration Bank with a statement within the agreed timeframe.[7]

Liability for Violations

Supporting documents and information include those specified in Articles 19 and 23 of Federal Law No. 173-FZ, such as contracts and amendments (Clause 1.2 of Instruction No. 181-I). Liability for missing deadlines for reporting, accounting forms, or supporting documents is established by Parts 6.1 – 6.3-1 of Article 15.25 of the CAO RF.

These offenses target the economic interests of the Russian Federation by undermining oversight of foreign trade and currency operations. Administrative liability applies for failure to meet registration deadlines, with fines under Parts 6.1 – 6.3 of Article 15.25 of the CAO RF increasing based on the delay:

• Up to 10 days: 5,000 to 15,000 rubles for legal entities;
• 10 to 30 days: 20,000 to 30,000 rubles for legal entities;
• More than 30 days: 40,000 to 50,000 rubles for legal entities.

The delay period includes business days on which the obligation could have been fulfilled.[8] In one case, a court ruled that although a company sent a contract to a bank via remote banking, it failed to follow up and ensure the bank assigned a unique number. The court found that the company did not exercise due diligence or take sufficient measures to comply with currency legislation. [9] Residents must not only meet deadlines but also actively manage their bank communications.

Under Part 6.3-1 of Article 15.25 of the CAO RF (introduced in 2020), a fine of 40,000 to 50,000 rubles for legal entities applies if documents are not submitted within 90 days after the deadline. This 90-day period is generally calculated in calendar days under Article 4.8 of the CAO RF, [10] though some courts calculate it in business days based on Supreme Court precedents. [11]

These offenses are formal, meaning they are complete at the moment the deadline is missed. Under Article 4.5 of the CAO RF, the statute of limitations for currency violations is two years from the date of the offense. In some cases, companies successfully appealed fines because this two-year period had expired.[12]

Additionally, flaws in the currency control authorities' work may indicate a lack of guilt. For instance, where a company repeatedly tried to submit an SPD but the bank refused because the customs office had not transmitted the necessary information, the court ruled that the company had taken sufficient measures to comply and overturned the fine. [13]

Currency control and regulation are vital parts of Russia's financial oversight. Proper performance of currency legislation requirements is essential, as the process involves extensive documentation and violations carry severe penalties.

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References

[1] How currency control works and why it is needed. Penalties and other liability. Semyonyuk Yu., November 25, 2022, Tinkoff Journal.

[2] Federal Law No. 164-FZ dated December 8, 2003, On the Fundamentals of State Regulation of Foreign Trade Activity.

[3] Foreign Trade Contracts: Innovations in Banking Currency Control (commentary on Central Bank Order No. 6062-U dated January 25, 2022). Kalinchenko E.O., Glavnaya Kniga Journal, 2022 No. 12.

[4] Decrees of the President of the Russian Federation: No. 79 dated February 28, 2022, On the Application of Special Economic Measures in Connection with the Unfriendly Actions of the United States of America and Foreign States and International Organizations Joining Them; No. 81 dated March 1, 2022, On Additional Temporary Economic Measures to Ensure the Financial Stability of the Russian Federation; No. 95 dated March 5, 2022, On the Temporary Procedure for Fulfilling Obligations to Certain Foreign Creditors; No. 126 dated March 18, 2022, On Additional Temporary Economic Measures to Ensure the Financial Stability of the Russian Federation in the Sphere of Currency Regulation; No. 179 dated April 1, 2022, On the Temporary Procedure for Fulfilling Financial Obligations in the Sphere of Transport to Certain Foreign Creditors; No. 252 dated May 3, 2022, On the Application of Retaliatory Special Economic Measures in Connection with the Unfriendly Actions of Certain Foreign States and International Organizations; No. 254 dated May 4, 2022, On the Temporary Procedure for Fulfilling Financial Obligations in the Sphere of Corporate Relations to Certain Foreign Creditors.

[5] Information Letter of the Bank of Russia No. IN-019-12/70 dated May 20, 2022.

[6] Letter of the Federal Tax Service of Russia No. SD-4-3/11054 dated June 7, 2018; Letter of the Bank of Russia No. 12-3-4/3564 dated May 16, 2018.

[7] Information Letter of the Bank of Russia No. 019-12-4/1210 dated February 28, 2022.

[8] Letter of the Federal Tax Service of Russia No. SA-4-7/6940 dated April 11, 2018; Determination of the Supreme Court of the Russian Federation No. 305-AD17-18495 dated March 28, 2018.

[9] Resolution of the Arbitration Court of the Volga District No. F06-12923/2021 in Case No. A12-11216/2021 dated January 18, 2022.

[10] Letter of the Federal Tax Service of Russia No. VD-4-17/12881@ dated August 10, 2020.

[11] Resolution of the Arbitration Court of the West Siberian District in Case No. A67-5392/2023 dated February 28, 2024.

[12] Resolution of the Arbitration Court of the Moscow District in Case No. A40-48001/23 dated December 18, 2023.

[13] Resolution of the Arbitration Court of the North-Western District in Case No. A42-6604/2019 dated April 28, 2020.